TaxTMI 
TaxTMI 
2025 (12) TMI 1160
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.... Appellant intends to utilize funds/incur expenditure outside India and consequently, the Appellant violates the provisions of section 11 of the Act. 3. The learned CIT(E) has erred in passing the impugned order without granting effective opportunity of hearing to the Appellant. 3. Facts of the case are that the assessee company is registered as a Non-profit organization under section 8 of the Companies Act, 2013. The main objects of the assessee company are stated to be promotion western classical, semi classical music and classical dance in all formats and to carry on the social and economic development of musicians all over the country. The assessee was granted registration under section 12A of the Act on 17.02.2020. With the introduction of the new regime mandating re-registration of all charitable organizations, it duly applied for registration under section 12AB of the Act and the same was granted to it 31.08. 2021 is valid for the period A.Y. 2022-23 to A.Y. 2026-27. 4. According to the impugned order, the assessee company filed an application in Form no. 10AB seeking registration under section 80G(5) of the Act on 09.12.2024.The ld. CIT(E) denied the registra....
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....lhi Bench of the Hon'ble Tribunal in the case of DDIT(E) v. The Associated Chambers of Commerce and Industry of India (ITA no. 6525/Mum/2013), wherein, it has been held that foreign travel expenditure incurred for the promotion of the trade and industry in India cannot be held to be violative of section 11 of the Act. 5.1 With regard to the Clause 3(b)(27), whereby, according to CIT(E), assessee may utilize funds outside India by entering into arrangements with governments outside India. It is submitted that the term 'otherwise' as used in the above clause cannot be stretched to such an extent as to interpret that the assessee intends to engage with any government or authority outside India or apply its funds outside India. The real intention behind the clause is simply to provide the assessee with a flexibility to engage with agencies or bodies which, while not expressly falling within the categories of Central, State, Municipal, or Local Government, nevertheless function as governmental or quasi- governmental authorities within India. 5.2 The ld.AR has further pleaded that the assessee has not incurred any expenditure outside India. The financial statements of the assessee ....
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....ion under section 12AB, but applied for approval under section 80G(5) of the Act. The two provisions operate in distinct fields, and therefore, the conditions prescribed under section 80G(5) alone are relevant for consideration of the assessee's present application. The assessee enjoys registration under section 12AB of the Act. The CIT(E) has not raised any objection nor initiated any proceedings for cancellation of such registration till date. This clearly implies that there is no specified violation as contemplated under section 12AB(4) and (5) of the Act. It is further submitted that the cited decision of Sila for Change Foundation (supra)is not applicable to the facts of the case as the main activity of the assessee was development services to another organisation in India and outside India. In the present case, the main activity of the assessee is confined to India only. It is only in a situation where some litigation is faced by the assessee, it has to be pursued. In the process, the cost may or may not be incurred outside India. Therefore, there is no specified violation. The assessee relies upon the order of Mumbai Bench of the Hon'ble Tribunal in the case of Dedhia Music ....
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..... It is not the case therefore that there is to be no application of income within India at all as per the objects. In fact the main object of the applicant assessee involves carrying out charitable activities in India. In this factual situation, denying registration u/s. 12AA of the Act, for the reason that its incidental object entailed application of income outside India, we find, would result in the assessee being denied exemption to income applied in India, which it would otherwise be entitled to under law. 14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities carried out in India will qualify as charitable for grant of registration, is only for the purpose of determining the income which qualifies for exemption u/s. 11 of the Act. The said section comes into operation only once registration is granted u/s. 12A of the Act and therefore cannot be relevant for the purposes of granting registration u/s. 12A of the Act. The scheme of the Act is that all entities carrying out charitable activities, as defined in section 2(15) of the Act, qua....
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....haritable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent, of the income from such property; . .. (b) ****** (c) income derived from property held under trust-- ( i)created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India; Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d)****** 3. So far as the benefit of section 11(1)(a) is concerned, it can be extended only to the extent to which such income is applied to such purposes in India. However, if ....
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....tration u/s. 12A of the Act is set aside and the Ld.CIT(E) is directed to grant registration as applied for by the assessee. 18. In the result, the appeal of the assessee is allowed." 6. We may examine whether the ratio of above said decision would also apply to the applications processed by Ld CIT(E) under new provisions of sec. 12AB of the Act. Under the provisions of sec. 11 to 13 of the Act, which are applicable to charitable trusts or institution, two authorities are involved, viz., (a) the Ld PCIT or CIT is empowered to grant or cancel registration u/s. 12A, 12AA or 12AB as the case may be. (b) the assessing officer is the authority who assesses the total income of the charitable trust or institution for every assessment year. 7. We shall examine the provisions of sec. 12AB of the Act. The authority to grant registration u/s. 12AB is the Ld PCIT or CIT. Under sec. 12AB of the Act, the three steps have been prescribed for the process of registration or cancellation of charitable trusts or institution. (a) For new charitable trusts or institutions, provisional registration is granted u/s. 12AB(1)(c) of the Act for a period o....
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....itution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant." (B) SECTION12AB 12AB. [Procedure for fresh registration.] [Ins. by the Act No. 38 of 2020, w.e.f. 1- 4-2021.] (1)The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,-- (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause,-- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about-- (A) the genuineness of activities of the trust or institution; and (B)the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii) after sat....
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.... (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall-- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution. Explanation.--For the purposes of this sub-section, the following shall mean "specified violation",-- (a) where any income derived....
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....ome outside India. According to Ld CIT(E), the same is not permitted under the Act and hence the registration provisionally granted to the assessee may be cancelled. We shall now examine as to whether the existence of objects for carrying out activities outside India or actual application of income outside India in accordance with its objects, would fall under any of the categories of "specified violations" listed out in the Explanation to sec. 12AB(4) of the Act or not. (i) Clause (a) would be attracted only if any income derived from the property held for charitable purpose is applied other than for the objects of the charitable trust or institution. Hence, so long as any income is applied for the objects of the charitable trust or institution, the clause (a) would not get attracted. Thus, if the objects clause of a charitable Trust or Institution permits carrying on objects outside India and if any income is applied for such objects, then it cannot be considered as application of income "for objects other than the objects of the charitable trust or institution" falling within the meaning of clause (a). Consequently, the clause (a) would not be attracted. (ii) C....
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..... It may be noticed that clauses (a),(c),(d) and (e) would be attracted only when there is application of income as mentioned in those clauses. Hence "actual application of income" is the condition to be satisfied for attracting the above said four clauses. 13. In our view, the provisions of sec. 11(1) would not fall under the category of "any other law", since it is only a computation provision. The provisions of sec. 11(1) do not require the charitable trust or institution to comply with any requirements, which are essential to achieve the objects of the trust. Further provisions of sec. 11(1) do not state that the application of income derived from property held under trust for activities carried outside India results in violation of any law. sec. 11 only states that the exemption under that section is restricted to income applied for charitable purposes in India, i.e., it does not permit exemption of income applied outside India. Hence income, if any, applied for objects outside India cannot be construed to be violation of 'any other law' falling within the meaning of clause (f) of Explanation to sec. 12AB(4) of the Act. 14. The foregoing discussions would sho....